If you have cars -- or vans, trucks or bicycles -- that you use 100 percent for business, you can deduct 100 percent of the costs to run and maintain them. If you or your staff use company cars for personal driving, the tax laws say you treat this as a fringe benefit, taxable to the employees using the car.

Employee Use

To determine how big a taxable fringe benefit to report on the W-2, you have to set a value on the employee's use. One way to value it is by comparing it to a lease: the value is what it would cost the employee to lease a comparable car for a year. Another is a flat $1.50 rate, as of 2013, for each trip to or from work, provided the employee agrees not to drive it anywhere else.

Mileage

The mileage rule says you figure the benefit by multiplying the personal mileage the employee drove by the IRS rate -- as of 2013 -- of 56.5 cents per mile. If a staffer drives the car 5,000 personal miles during the year, say, her benefit is $2,825. Usually the vehicle must be used at least half the time for business and driven at least 10,000 miles during the year to use the per-mile method to figure the taxable benefit.

Business Write-Off

You can deduct the cost of the car for business use, and deduct the employee's personal use as a fringe benefit. The write-off for business use is based on either the per-mile deduction or the total expenses of driving. If the employee uses the car 60 percent of the time for business, for instance, and the costs -- gas, oil, rotating tires, repairs and so on -- were $10,000 for the year, that's $6,000 in expenses.

Records

Whatever methods you use to figure your expenses, you have to keep good records. If you base expenses on the actual costs of running the company car, you need receipts for gas, insurance, new tires and any other expenses. If you opt for the per-mile approach, you need to track miles. This doesn't have to be pinpoint exact. If you drive roughly the same business mileage every month, recording one or two months gives you a valid basis for the year.

Resources

About the Author

A graduate of Oberlin College, Fraser Sherman began writing in 1981. Since then he's researched and written newspaper and magazine stories on city government, court cases, business, real estate and finance, the uses of new technologies and film history. Sherman has worked for more than a decade as a newspaper reporter, and his magazine articles have been published in "Newsweek," "Air & Space," "Backpacker" and "Boys' Life." Sherman is also the author of three film reference books, with a fourth currently under way.